Asian markets slumped largely on Monday as a forecast-busting jobs report dashed US interest rate lowering prospects, with attention now shifting to the publication of vital inflation data this week.
The selling followed a decline in all three major Wall Street indexes, as investors reduced their expectations for how many rate cuts the Federal Reserve will make this year.
Analysts, however, warned that while the job numbers were higher than expected, they would not likely cause authorities to delay decreasing borrowing prices as unemployment rose to a two-year high.
According to Chris Larkin of E*Trade from Morgan Stanley, the reading “didn’t necessarily amount to a ‘all-clear’ signal for the Fed, but there also didn’t appear to be anything in it that would derail its plan to cut rates”.
SPI Asset Management’s Stephen Innes noted that “the US labor market appears to be in a comfortable zone — not too hot and not too cold.”
“Reminiscent of Goldilocks’s ‘just right’ porridge.”
Traders expect three rate cuts this year, down from six three months ago.
Traders are now focusing on the latest consumer price index reading from Tuesday.
Tokyo, Sydney, Seoul, Singapore, Wellington, Mumbai, Bangkok, Taipei, and Manila all had negative values.
A tech sell-off weighed on Japanese equities after the sector suffered losses in New York, while exporters were hammered by a stronger yen as reports suggested the country’s central bank was considering exiting its ultra-loose monetary policy shortly.
There was minimal reaction to the announcement that the economy narrowly avoided a recession in the last months of last year.
Hong Kong and Shanghai climbed, however, following numbers showing a larger-than-expected increase in Chinese consumer prices last month, while a report suggested regulators had called on large banks to provide additional help to the country’s devastated property sector.
The results brought much-needed good news for the faltering economy, but commentators warned it would continue to encounter headwinds.
“Recovery in domestic demand will only be gradual, as households worry about their income and job prospects amid heightened economic uncertainty while consumer confidence remains low,” said Kelvin Lam, chief economist at Pantheon Macroeconomics
“Therefore, it is too early to say China has emerged from consumer deflation from just one data point.”
On Monday, the country’s leaders concluded a major meeting by promising to do more to repair the devastated housing market and cut unemployment.
Officials have spoken about the economy’s issues, admitting that achieving a 5% growth objective will be difficult and pointing to “hidden risks”.
Bitcoin slipped marginally after reaching a new record high above $70,000 for the first time on Friday, as demand increases and speculators become confident about the potential of interest rate cuts this year.
– Key figures around 0710 GMT –
Tokyo – Nikkei 225: DOWN 2.2 percent at 38,820.49 (close)
Hong Kong – Hang Seng Index: UP 1.3 per cent at 16,568.52
Shanghai – Composite: UP 0.7 per cent at 3,068.46 (close)
Dollar/yen: DOWN at 146.89 yen from 147.06 yen on Friday
Euro/dollar: UP at $1.0945 from $1.0942
Pound/dollar: UP at $1.2857 from $1.2854
Euro/pound: UP at 85.13 pence from 85.09 pence
West Texas Intermediate: DOWN 0.9 per cent at $77.35 per barrel
Brent North Sea Crude: DOWN 0.8 per cent at $81.44 per barrel
New York – Dow: DOWN 0.2 per cent at 38,722.69 (close)
London – FTSE 100: DOWN 0.4 per cent at 7,659.74 (close)